A version of this article was originally published in Atticus Partners website
As the Russia-Ukraine conflict grinds on, Spain and NATO’s southern flank are not always at the forefront of European defence discussions.
Madrid’s grand boulevards and regal parks feel far removed from turbulence elsewhere in Europe and the Middle East. Yet an economic and security transformation is underway, with significant consequences for Spain’s military and private sector. This was evident at the Youth Atlantic Treaty Association 10th Mediterranean Dialogue in Madrid (6-8 October) which I attended, the theme being “Securing NATO’s Southern Flank in the Air and Space Domains” where a select group of young professionals interested in defence, security and geopolitics were given a unique insight into Spain’s contributions and ambitions in this sphere.
Confidence is growing in Madrid as Spain assumes a more prominent European economic and political role. Sustained growth has made Spain one of Europe’s strongest-performing major economies, with GDP expanding by 3.7% in 2024 and 2.6% in 2025, comfortably outpacing the EU.
Madrid is central to this expansion, attracting international capital, businesses and talent. The region’s economy grew by 4.3% in 2024, while GDP per capita reached €47,220 in 2025, compared with Spain’s €34,237 average. The capital generates approximately 12.5% of national economic output with just 7% of the population, attracting over 150 international investment projects in 2025. Alongside growing commercial ties to Latin America, this momentum strengthens Madrid’s international standing amid shifting European priorities.
Spain’s economic confidence coincides with rising defence expenditure, driven by Russia’s invasion of Ukraine and NATO pressure. Historically among the Alliance’s lowest spenders, Spain allocated 0.9% of GDP to defence in 2018, rising to approximately 1.3% by 2024. In April 2025, Prime Minister Pedro Sánchez announced an additional €10.47 billion in defence investment, bringing planned expenditure to €33.12 billion, or 2% of GDP.
Despite resisting NATO’s new 5% target for 2035, Spain’s defence expansion presents substantial opportunities for domestic industry and international investors, particularly around Madrid’s concentrated defence-industrial ecosystem. Major orders include €7.24 billion for self-propelled artillery, €3.2 billion for F-100 frigate modernisation, and contracts for 100 Airbus helicopters and 18 C295 transport aircraft. Principal beneficiaries include Indra, Airbus and Navantia, which dominate Spain’s defence modernisation programmes.
However, opportunities extend beyond procurement. The expanding definition of security, encompassing energy, technological and societal autonomy, is encouraging public-private collaboration. One example is Moeve, a Spanish energy multinational leading domestic production of Sustainable Aviation Fuel (SAF) and Electro-Sustainable Aviation Fuel (E-SAF). Beyond environmental benefits, these fuels could strengthen Spain’s energy independence, with the country still importing 67% of its energy supply. Government-industry collaboration will be essential to overcoming production constraints and short-to-medium-term price challenges, particularly while fossil fuels remain cheaper, albeit strategically vulnerable.
Space represents another increasingly important security domain. Spanish satellite operator Hispasat is strengthening sovereign communications capabilities through its involvement in IRIS², the EU’s secure satellite communications programme. By leading development of the ground segment, Hispasat is helping enhance connectivity and European strategic autonomy, a clear example of private sector expertise and dynamism being leveraged to support national and continental common security objectives.
Long perceived as a peripheral player in Europe’s economic landscape, with an economy heavily reliant on tourism and traditional industries, Spain is increasingly challenging this perception. Its growing investment in defence, emerging technologies and strategic infrastructure, coupled with closer collaboration between government and industry, is positioning the country as an increasingly important contributor to European security and technological innovation. This transformation reflects Spain’s broader ambition to strengthen its industrial capabilities, attract international investment and play a more prominent role in shaping Europe’s economic and security future.
Despite these advances, challenges remain. Spain’s transformation involves numerous stakeholders with overlapping responsibilities, spanning EU institutions, national and devolved governments, businesses and advisers. Strategic stakeholder engagement is therefore essential for defence and dual-use technology companies seeking competitive advantage, investment and procurement opportunities.
Communications present another challenge. Defence remains politically sensitive in Spain, requiring companies to navigate public perceptions, competing priorities and evolving narratives around military expenditure and strategic autonomy. Effective communications are critical to building trust, demonstrating the economic and societal benefits of defence investment, and establishing credibility with decision-makers.
Spain’s transformation also creates opportunities for UK–Spain collaboration in defence innovation, advanced technologies and industrial partnerships. However, converting these into commercial outcomes requires understanding both countries’ political environments, procurement priorities and industrial ecosystems. Companies that identify shared strategic interests, cultivate cross-border relationships and communicate compelling propositions will be best positioned to benefit.
However, Spain’s political landscape is now entering a period of uncertainty. Prime Minister Pedro Sánchez’s announcement of snap general elections for 29 November 2026, bringing forward a vote originally expected in 2027, adds a new dimension to the country’s defence and industrial transformation. The outcome could reshape military spending commitments, procurement priorities and Spain’s relationship with NATO and European partners. While the strategic drivers of defence modernisation remain firmly in place, the political direction of that investment could soon change, and so the durability of Spain’s progress is not guaranteed.
Photo credit: Lee Peterson
Jude Petrie (BA, Cantab) is Executive Assistant to the Chairman, The Alphen Group, and an Account Executive at public affairs firm Atticus Partners.